ZipRealty plans to close its one and only Minnesota office in Minneapolis end of Jan affecting 77 agents.

Also tentative plans to idle 129 real estate agents in the Raleigh and Charlotte, N.C. offices.

Most likely the agents will have option of staying with ZipRealty as independent contractors.

Last November the company converted 3,300 agents nationwide from employees to independent contractors.

Interesting news about a member of our industry! I am seeing many interesting changes in my area with companies and agents.

I am not familiar with ZipRealty at all. Is it correct to suspect that it is (was) an alternative model real estate company?

Yes, Zip gives back a percentage of the commission to the buyer or seller. I think it is 30% to the seller, and 20% to the buyer.

Goes to show that it's difficult to operate when you are cutting your rates. the idea of being in business is not to break even. it is to make a profit.

Thanks for the information BK.
It seems that most of these alternative model firms fail or quickly shift there model towards a full service brokerage.

Discount brokerage models seem to be best suited for firms that 1) can maintain low overhead costs and 2) are located in higher-priced areas.

As soon as you start expanding, you start needing substantially more administrative staff, physical facilities, more advanced computer systems, etc., and you lose a great deal of the cost savings.

The bulk of my clients are in the $600-800k range, which isn't all that impressive for L.A., so I can be profitable if I bring in 1% on my deals so long as I keep overhead to a minimum. But if the average sales price in your area is $150k, then it's just not going to be a viable business model.

I never understood how they got away with making the agents employees and requiring a certain number of hours and not paying wages. It was fine for the agents they had that actually sold something but for the newbies it was hours a day on a computer platform with no pay. I kept thinking the labor board would get em. We had a huge furniture company here that had the same model and the labor board slapped them hard. In VA if you are an employee you have to at least make minumum wage.

This is intersting about Zip. If it's true that they give 30% back to the Sellers...are they just reducing their commission rate upfront, or are they actually writing a check to them after closing? Interesting either way. I have helped many clients over the years that tried some of these alternative model real estate brokers, and they came back soliciting help with the full-service types.

I am one of those people that take advantage of Zip resources but not their service. It's interesting to learn the inner workings of Zip.

unfortunately, that's just the nature of the business. I know people who use zip realty's website but work with non zip agents.

another company to watch is redfin

Have you ever done a transaction wit a zip agent? I have - a few of the worst transactions of my life. It is my experience that 99% of their agents know nothing. They dont understand basic real estate, contracts, and have no idea how to bring a deal to close. I've dealt with Zip agents a few times.
In fact I just got another offer from one.
Her logo is (and I quote off of her materials):
"Your Home Is Were Are Heart Is"
In fact my broker recruited a zip agent this year. She looked great on paper - lots of closed buyer side sales...but when she came on board, it became blatatntly clear she knew nothing. Not how to get clients, how to advise clients, she did not even know how to do a CMA. I helped her with a BPO once - it took her 3 DAYS.
She had made 12k off 14 closed transactions the previous year at zip - thats how bad the split is ( and our average sale around here is about 200k).
But they spoon feed leads and I guess they have an automated system for follow up that just tells agents what to do. The agents are just robots that follow the system.
Anyway - we all tried to help her out for about 6 months. It was useless. She couldnt hack it, and just kept whining about "send me leads". She went back to zip.
Thank God - I just couldnt take the endless calls for help anymore. Was like trying to teach a monkey to dance.
Anyway - not to say ALL Zip agents are the same. Ive dealt with many. One was able to get through a transaction and close.

Too Funny!

ROFLMBO Minna!!!

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